Collateral Underwriter (CU) FAQs - OREP

1 2015 Fannie Mae. Trademarks of Fannie Mae. February 2015 Page 1 of 7 Collateral Underwriter (CU) faqs Updated February 2015 Collateral Underwriter (CU ) is a proprietary appraisal risk assessment application developed by Fannie Mae to support proactive management of appraisal quality. CU is the latest addition to Fannie Mae s suite of risk management tools for lenders. Details and training schedules are provided on the CU web page. New/updated questions in this document since the previous version (December 1, 2014) are indicated by or . Q1. How is CU feedback provided? CU feedback is available in two ways: 1) Real-time feedback in UCDP: Effective January 26, 2015, a CU risk score, flags, and messages are provided in real time after an appraisal is submitted to Fannie Mae through the uniform Collateral data Portal (UCDP ).

2 The CU risk score, flags, and messages are provided on the Fannie Mae tab and the UCDP Submission Summary Report. Any UCDP user that submits an appraisal to Fannie Mae has access to the CU risk score, flags, and messages. 2) CU web-based user interface: For in-depth appraisal analysis, the full CU application is available to Fannie Mae sellers via a web-based user interface (registration required). Fannie Mae account teams are contacting lenders through a phased outreach approach to assist them with implementing the user interface, which is now available to approved Fannie Mae sellers. Approved sellers that want quicker access may reference the CU User Interface Registration Guide for self-service information. NOTE: It is critical that lenders obtain proper training for use of the CU feedback, whether obtained through UCDP or the user interface.

3 Training is available 24/7 via eLearning courses posted on the CU web page and also described in the CU User Interface Registration Guide. Correspondents will have access to the web-based application later in 2015. Other UCDP users that are not Fannie Mae sellers or correspondents including appraisal management companies (AMCs) that have UCDP access as Lender Agents can view the CU risk score, flags, and messages in UCDP but do not have access to the web-based application. Q2. How should lenders use CU? Keep in mind that to take advantage of CU findings and incorporate it into the review process, lenders must submit appraisals to UCDP prior to appraisal review. CU is a tool intended to assist lenders in underwriting appraisals. Here are some important points about using CU successfully: Understand the limitations of automated analysis and be aware of potential property or neighborhood nuances.

4 Bookmark New Updated Updated Updated 2015 Fannie Mae. Trademarks of Fannie Mae. February 2015 Page 2 of 7 CU is effectively predictive of appraisal defects, but there are false positives. Well-informed human judgment should take precedence over automated results. The expectation is not to utilize the full CU functionality and information available in the CU user interface on every appraisal. The various CU tools can be used to validate or dismiss potential red flags. Fannie Mae does not instruct or suggest to lenders that they ask the appraiser to address all or any of the 20 comparables that are provided by CU for most appraisals. Carefully review the appraisal report before seeking additional clarification from the appraiser based on CU findings.

5 The risk analysis performed by CU is for use by the lender in their analysis of the appraisal report; excerpts may be shared with the appraisers in proper context upon completion of the lender s due diligence review (see Q3). It is very important to take advantage of CU training to understand how to use the CU findings in UCDP and the user interface. Q3. How should lenders use CU findings to inform conversations with appraisers? Fannie Mae expects lenders to use human due diligence in combination with the CU findings, and will actively follow up with lenders who are reported to be asking appraisers to change their reports based on CU findings without any further due diligence by the lender. Fannie Mae encourages lenders to carefully review the appraisal report including all commentary before seeking clarification from the appraiser.

6 Don t assume the appraiser is wrong just because you see a CU message. Taking messages or alternative sales at face value and simply asking your appraiser to address them is neither effective nor efficient. CU is intended to supplement a lender s human due diligence. After completing a thorough review, lenders should be able to have constructive dialogue with appraisers to resolve specific appraisal questions or concerns. Lenders should not, however, make demands or provide instructions to the appraiser based solely on automated feedback. Specific information or excerpts from the CU findings on which the lender seeks clarification may be shared with an AMC or appraiser, with appropriate context and after analyzing the CU findings to determine whether there is an issue that the AMC/appraiser may need to address. The legal terms and conditions for CU prohibit: using the licensed application in a manner that interferes with the independent judgment of an appraiser, providing access to CU s web-based user interface to third parties (including appraisal management companies (AMCs) and appraisers), and providing copies or displays of Fannie Mae reports that contain CU findings to AMCs and appraisers (note that AMCs who are registered to use UCDP as Lender Agents will see the CU risk score, flags, and messages available through UCDP).

7 Q4. May a lender share access credentials for UCDP and/or CU with a trusted service provider? No. For data security and business reasons, Fannie Mae technology usage terms do not allow lenders to share technology application credentials with third parties. New Updated 2015 Fannie Mae. Trademarks of Fannie Mae. February 2015 Page 3 of 7 Also note that the legal terms regarding Collateral Underwriter (CU ) and the uniform Collateral data Portal (UCDP ) found in the Single-Family Shipping & Delivery Applications Schedule of the Fannie Mae Software Subscription Agreement prohibit Licensees from: using the licensed application in a manner that interferes with the independent judgment of an appraiser, providing access to CU s web-based user interface to third parties (including appraisal management companies (AMCs) and appraisers), and providing copies or displays of Fannie Mae reports that contain CU findings to AMCs and appraisers (note that AMCs who are registered to use UCDP as Lender Agents will see the CU risk score, flags, and messages available through UCDP).

8 Q5. If lenders are prohibited from providing copies or displays of reports that contain CU findings to third parties, can they still use Lender Agents to work on their behalf? Yes. Lender Agents who submit appraisals to UCDP on behalf of their lender clients have access to the CU findings through the Fannie Mae tab in UCDP, on the Submission Summary Report (SSR), or through a direct integration with UCDP if applicable. Both lenders and Lender Agents acting on lenders behalf are prohibited from distributing the CU Print Report or the SSR, making demands of or providing instruction to AMCs/appraisers based solely on the CU automated output, or using CU to interfere with the independent judgment of the appraiser. (See Q3 for information about how to use CU findings to interact with appraisers.) Note that a lender using a Lender Agent such as an AMC is fully responsible for compliance with Fannie Mae s requirements, just as if they did the appraisal review in-house, and must have policies and procedures in place to review compliance by their third-party agents.

9 Q6. Are lenders and appraisers expected to address all 20 alternative comparable sales that may be identified by CU? No. CU generates up to 20 alternative comparables for the purpose of providing context for the appraisal report reviewer. Fannie Mae s expectation is not that all alternatives be addressed or that only the CU top-ranked comps be used. Lenders may examine the alternative comparables in the course of reviewing an appraisal report to determine if their use may result in a different conclusion about value from that provided by the appraiser. Q7. Does CU favor lower-priced comparables and encourage under-valuation? No. Appraiser-provided comparables are analyzed by CU and ranked against a pool of available sales based on physical characteristics, location, and sale date. The sale prices of these comparables is not a factor in the ranking.

10 High CU risk scores may be due to potential under-valuation, as well as potential over-valuation, or other factors. CU does not take a lower is better approach. Q8. Is technology integration required to use CU? The CU web-based user interface is accessed through a URL with no technology integration required. The CU risk score, flags, and messages are provided on the Fannie Mae tab in UCDP. Users that access UCDP through a vendor service should check with their vendor if there are any issues with accessing the CU findings. New New New 2015 Fannie Mae. Trademarks of Fannie Mae. February 2015 Page 4 of 7 Q9. Is there a fee for CU? No. Fannie Mae developed CU with the primary objective of improving appraisal quality and Collateral risk management for Fannie Mae and its lender partners.